Allied Irish Bank Plc v Cuddy

• Jurisdiction: Ireland
• Judge: Mr Justice Maurice Collins,Birmingham P
• Judgment Date: 30 July 2020
• Neutral Citation: [2020] IECA 211
• Date: 30 July 2020
• Docket Number: Court of Appeal Record No 2019/198
• Court: Court of Appeal (Ireland)

Between

Allied Irish Bank Plc

Plaintiff/Respondent

and

Sean Cuddy

Defendant/Appellant

[2020] IECA 211

The President

Costello J

Collins J

Court of Appeal Record No 2019/198

THE COURT OF APPEAL

CIVIL

Summary judgment – Arguable defence – Limited recourse – Appellant seeking to appeal summary judgment – Whether the appellant had an arguable defence to the respondent’s claim

Facts: The High Court (Keane J), on 1 April 2019, granted summary judgment to the plaintiff/respondent, Allied Irish Bank Plc (AIB), against the defendant/appellant, Mr Cuddy, in the sum of €1,500,000 on foot of a guarantee dated 3 September, 2009. Mr Cuddy appealed to the Court of Appeal against that judgment, contending that he had an arguable defence to AIB’s claim on two grounds and that the claim ought therefore to be remitted for plenary hearing. The two grounds relied on by Mr Cuddy were as follows: that AIB’s claim was statute-barred (the Limitation Ground); and that Mr Cuddy entered into the guarantee on foot of an earlier (and continuing) representation to the effect that his liability as guarantor would be limited to recourse to a warehouse owned by him in Oranmore, County Galway and that there was a binding collateral contract to that effect (the Limited Recourse Ground).

Held by Collins J that there were likely to be “formidable obstacles” in the way of Mr Cuddy’s defence (as Birmingham J considered that there were in IBRC v Kelly [2014] IEHC 160). However, it was not, in Collins J’s opinion, clear that Mr Cuddy had no defence. Collins J observed that (i) the detail of what was said by Mr Cuddy and Mr Comerford, (ii) the availability of the evidence of Mr Comerford (a factor which, in itself, was of very significant weight in Collins J’s view) and (iii) the fact that the sole security sought by AIB in connection with the guarantee was in respect of the warehouse lead him to conclude that the evidence was more than mere assertion and, exceptionally, was sufficient to warrant leave to defend being given on the Limited Recourse Ground, even in the absence of supporting documentary material.

Collins J held that he would allow the appeal and make an order pursuant to Order 37, Rule 7 of the Rules of the Superior Courts adjourning AIB’s claim to plenary hearing and giving Mr Cuddy leave to defend that claim limited to the Limited Recourse issue. Collins J would hear the parties in relation to any consequential orders.

Appeal allowed.

APPROVED – NO REDACTIONS REQUIRED

JUDGMENT of Mr Justice Maurice Collins delivered on 30 July 2020

PRELIMINARY

1 On 1 April 2019 the High Court (Keane J) granted summary judgment to the Plaintiff/Respondent (hereafter “ AIB”) against the Appellant (hereafter “ Mr Cuddy”) in the sum of €1,500,000 on foot of a guarantee dated 3 September, 2009.

2 Mr Cuddy appeals that judgment, contending that he has an arguable defence to AIB's claim on two grounds and that the claim ought therefore to be remitted for plenary hearing. The two grounds relied on by Mr Cuddy are as follows:

• • that AIB's claim is statute-barred (“ the Limitation Ground”)

• • that Mr Cuddy entered into the guarantee on foot of an earlier (and continuing) representation to the effect that his liability as guarantor would be limited to recourse to a warehouse owned by him in Oranmore, County Galway and that there is a binding collateral contract to that effect (“ the Limited Recourse Ground”)

3 For the reasons set out in this judgment, I would allow the appeal, set aside the judgment entered by the High Court and remit AIB's claim for plenary hearing, but limited to the Limited Recourse Ground only.

FACTS

4 Mr Cuddy was owner, and he and his wife were directors, of Cuddy Development Limited (“ the Company”). In January 2003 AIB issued a letter of sanction to the Company offering two facilities in the combined amounts of €2,291,000. The Company accepted the facilities on 29 January 2003. The funds were advanced to finance inter alia the purchase of a property at Barna, County Galway (“ the Barna property”). As security for the loan the Company was required to charge the Barna property in favour of AIB.

5 In 2007 the Company required further finance to complete the development of apartments on the Barna property. On 13 November 2007 there was a meeting attended by the appellant, accompanied by his son and also attended by the appellant's financial advisor, Mr. Tom Comerford, on behalf of the Company and Mr. Fiachra Garvey and Mr. Liam Byrne from AIB.

6 Mr Cuddy says on affidavit that, at that meeting, Mr Garvey and Mr Byrne indicated that AIB might require additional security and asked whether Mr Cuddy would be willing to offer his warehouse in Oranmore as security. Mr Cuddy says that he made it clear that he was not prepared to put his personal assets, particularly his family home, at risk and says that he was assured that any additional security would be “limited to the warehouse and nothing else”. That warehouse was, he says valued at approximately €1 million at that time. As a result of this meeting and certain further exchanges between his financial advisor (Mr Comerford) and the Bank, Mr Cuddy says that it was his clear understanding that the Bank's recourse on foot of any guarantee would be limited to the Oranmore warehouse. That was, he avers, his understanding “ at all material times” and he says that it was on the basis of AIB's representations to that effect that he and his wife executed a form of guarantee on 1 October 2008. 1

7 Mr. Comerford states on affidavit that, at the meeting on 13 November 2007, Mr. Byrne and Mr. Garvey:

“specifically stated that the Bank's recourse to the Defendant would be limited to the warehouse premises and that he would not be personally liable for the company's debts beyond that asset. I recall the Defendant reluctantly agreed to offer the warehouse as additional security if it was absolutely necessary.”

8 Mr Garvey and Mr Byrne swore affidavits in response in which they address the meeting of 13 November 2007. Mr Garvey states that he does “not specifically recall discussing a Guarantee with Mr Cuddy or Mr Comerford.”. He goes on to explain that neither he nor Mr Byrne “ had authority to either offer or agree such a limited recourse guarantee even if this was discussed.” His role was simply to prepare and submit an application to AIB's credit committee whose function it was to determine if a loan would be sanctioned and if so on what terms.

9 For his part Mr Byrne states that he is “ certain that neither Mr Garvey nor I made any representations to Mr Cuddy, or anyone else present at that meeting, that the Plaintiff was agreeing to limit its recourse to the Warehouse only.” But it is not clear to what extent that certainty is the product of any actual recollection of the meeting. Mr Byrne explains that neither he nor Mr Garvey had authority to offer or agree any limitation on recourse. Such a request would have to be made to and approved by AIB's credit committee. It appears to be on that basis that Mr Byrne's stated certainty rests. He did not have the authority to make, and therefore did not make, any representation. “ Rather [so Mr Byrne continues]:

“at its very height, I would have advised Mr Cuddy that this would be requested in the loan application to go to the Credit Committee. Ultimately, as is apparent from the Letters of Sanction issued by the Plaintiff, any such request was not granted by the Plaintiff.”

In any event, it will now be a matter for the High Court to determine, on the basis of whatever evidence that it may hear (including cross-examination) what was said at the meeting on 13 November 2007.

10 On 3 December 2007 AIB issued a letter of sanction offering inter alia two facilities in the combined amounts of €5,113,000. The letter required that all security was perfected prior to draw down and it specified the security required which included:

“3. Letter of guarantee for €1,500,000 in favour of AIB Bank to be signed by Sean and Philomena Cuddy in respect of the obligations of Cuddy Developments Limited, supported by: 7,200 sq. ft. commercial unit at Oranmore, Galway vesting in the joint names of Sean and Philomena Cuddy.”

11 Mr Comerford says on affidavit that after he had sight of the letter of sanction, he telephoned Mr Byrne to discuss this requirement and that he questioned the inclusion of a guarantee in the letter of sanction in circumstances where it had not previously been discussed. He avers that Mr. Byrne specifically informed him that the commercial lending department of the respondent requested that the deal be structured in this way (a personal guarantee supported by a mortgage over the warehouse) and that Mr Byrne “ assured me that the paperwork relating to the guarantee would state that same was limited to the warehouse and that the Bank would have no further recourse” against Mr Cuddy.

12 To this Mr Byrne re-iterates the point above regarding the limited authority that he had. Again, he is “ certain” that, in any conversation he may have had with Mr Comerford after the November meeting, he made it clear that his only role was to pass any request to the credit committee and he “ had no authority to alter the terms of a Letter of Sanction … once issued.” Again, it is not clear from Mr Byrne's Affidavit whether or not he actually recollects any phone conversation with Mr Comerford concerning the letter of sanction. That is a matter that can be explored at trial.

13 It is common case that there were no further negotiations between the parties and that no revised letter of offer issued from AIB. That is, understandably, relied on by the Bank.

14 In March 2008 the Company accepted the letter of sanction in the form issued in December 2007 and executed the required mortgage debenture. Mr Cuddy and his wife also executed a guarantee in favour of AIB in respect of the...